Private equity investing, especially in the middle market, has never been hotter. Market conditions are ideal, and fundraising is at historic levels. Despite this appearance, actual results suggest that something is wrong. Jeffrey Pomerance, Head of the Transactional Practice at SulmeyerKupetz, and David McCarthy, Founder and Principal of D.R. McCarthy & Associates, authored an article in Journal of Private Equity discussing why the private equity investment model needs to change and how investors can take a more “active” role in improving the performance of their portfolio companies.
Jeffrey and David noted that the most successful portfolios of this investment cycle will relate to those investments that are aggressively worked throughout the investment life and, in particular, following the closing of the initial investment. More investment firms—those they believe will be the most successful—are shifting to a true “activist” investment model. They offered several observations and recommendations that investors should consider which, when implemented, can help private equity investors enhance results and reach return targets.
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